The greatest gas crisis to hit the EU in decades has subsided, as European natural gas futures have stabilized below €50 per megawatt-hour for the first time in over 17 months. Yet, there are indications that further price drops are unlikely.
As Russia‘s gas cutoff struck Europe with about $1 trillion in energy expenses, slamming the region’s economy and driving inflation to the highest in decades, futures fell by more than 80% from their peak in August. Currently, the continent is experiencing a fast reversal as Qatar receives substantial supplies of liquefied natural gas from the US, relatively warm weather, attempts to cut fuel usage, and other factors to help with the situation.
The EU could Survive this Winter and the One After
For the time being, seasonally high storage levels are a sign of hope that the EU will survive this winter and the one after. The majority of the regular Russian gas quantities are no longer there, and European countries seem to have adjusted with plenty of substitute possibilities.
Analysts disagree on whether the gas prices will last, though. Lower prices might make gas more cost-effective for electricity generation in Europe than alternatives like coal as the end of winter draws near, and heating demand declines.
According to Stefan Ulrich, an analyst at BloombergNEF, “Gas prices have fallen into the fuel-switching zone implying that it is now more viable to run the greatest efficiency gas plants in contrast to the lowest efficiency coal plants.”
Worldwide Demand Increases in Gas Crisis
From China to India, demand is also increasing. If the winter is particularly cold or if there are supply issues, prices might go substantially. While gas prices have fallen, carbon costs have also increased, bringing the price of gasoline to a point where it is comparable to the price of oil.
According to Steve Hill, executive vice president for energy marketing at Shell Plc, “we’re getting to a level where the downside is more constrained, but there’s still certainly upside, particularly if you get the robust economic growth in China.” “We are getting close to that range.”
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